The rise of online casinos worldwide has revolutionized how users interact with games of chance, as well as how various jurisdictions license and regulate the iGaming industry within their borders.
It is no surprise that the United States and the European Union have emerged as the largest and most sought-after markets for online gambling companies. However, these jurisdictions are also notorious for their stringent regulations and long-standing reluctance to legalize online sportsbooks and casinos fully. The way in which the US and EU approach iGaming brands is one of particular divergence between the two jurisdictions, with the European Union having a longer history of experience in dealing with iGaming providers, trying to balance consumer protection and reasonable taxation.
A History of Fragmentation and Harmonization
When it comes to the United States, casino regulations have historically been the prerogative of individual states. For example, the likes of Las Vegas and Atlantic City developed into gambling hotspots due to the legalization of land-based casinos in the states of Nevada and New Jersey.
Even after the 2018 Supreme Court ruling that overturned the federal ban on sports betting, expansion has been slower than many industry experts had expected.
As of this writing, 30 states allow some form of sports betting, while online casinos have limited reach. Each state can set its own tax rates, licensing requirements, and consumer protections, which makes for a predictable patchwork of regulations for gambling companies looking to register in a particular state.
On the other hand, the European Union has taken the route of harmonization without centralization. For example, Germany and Sweden impose tight controls and high taxes on gambling companies, while Malta, Cyprus, and Estonia are much friendlier to local companies in the iGaming market, allowing them to operate across the EU, while also remaining competitive and compliant with EU-wide regulations. This creates a diverse mix of jurisdictions within the EU and allows casino operators to choose where they would like to be domiciled based on a variety of factors, such as banking, taxation, licensing, and overall speed of the bureaucratic apparatus.
Licensing Models in the U.S. VS the EU
As we have already mentioned, the United States largely delegates the licensing process to individual states, which is why you can come across states where both land-based and online casinos are legal, and those with very strict regulations on any type of game of chance.
Taxation also varies considerably between states. For example, New Jersey upholds a relatively modest 15% tax on online casino revenues, which is scheduled to rise to 19.75%, while Pennsylvania charges a whopping 54% on online slot winnings.
This fragmentation also makes the U.S. market expensive to enter and complicated due to individual licensing and regulatory permits in each state of the country.
Advertising and Consumer Protection
The divide between the U.S. and the EU also extends to how they treat gambling advertisements and promotional content. In the United States, responsible gaming regulations differ widely: operators are required to contribute to addiction treatment funds in some states, but in others, the requirements are relaxed. Advertising has skyrocketed since legalization, with casinos and sportsbooks covering TVs, radios, and websites.
On the other hand, the EU is considerably stricter when it comes to what advertising channels are allowed for casinos and sportsbooks. As Cyprus and Malta are two of the most active jurisdictions for EU-based iGaming companies, much of the outside focus is typically directed at companies domiciled there.
For instance, new online casinos launched in CY have more freedom to advertise their services, while on the other hand, Spain and Italy have banned virtually every form of gambling advertising available to iGaming companies, with the motive to protect young people from being exposed to gambling at a very young age.
The Global Implications of Regulatory Divide
The U.S.-EU regulatory gap has a major impact on global markets. U.S. operators are stymied by a patchwork of regulations and hence prefer to focus domestically, while European companies employ cross-border licenses to expand across the globe. It is not surprising, therefore, that European firms dominate B2B casino technology, while some of the largest platforms in the U.S. focus on sports betting.
Gamblers, by contrast, inhabit very different worlds. The American gambler may have his choices restricted to state-approved apps with minimal competition, whereas the European counterpart enjoys dozens of approved sites with equitable bonuses and open protection policies. Such differences betray the mechanism by which local regulation dictates experience in a globalized industry.
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